PIPES Act of 2016 & PHMSA Penalties Increased

PIPES Act of 2016 Signed into Law

The PIPES Act of 2016 was signed into law by President Obama on June 22, 2016.

The PIPES Act, which is more formally known as the Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016, reauthorizes the Pipeline Safety Act through the end of September 2020.

One of the top priorities of the Act is the requirement for the Pipeline and Hazardous Materials Safety Administration (PHMSA) to fulfill the mandates from the 2011 re-authorization.

The following is a recap of the main requirements of the PIPES Act of 2016:

• Provides funding for the operational expenses of PHMSA.
• Requires PHMSA to update Congress 120 days after the date of enactment of the Act and every 90 days thereafter on outstanding statutory directives, including the status of each mandate, reasons for its incompletion, and estimated completion date.
• Requires two reports on the effectiveness of integrity management programs for both natural gas pipelines and hazardous liquids pipelines.
• Requires a study on the new innovations in pipeline materials, corrosion prevention technology, and corresponding training.
• Requires vacancies to be filled on the Technical Pipeline Safety Standards Committee, the Technical Hazardous Liquid Pipeline Safety Standards Committee, and other committees, within 90 days of enactment of the PIPES Act of 2016.
• Mandates that pipeline operators receive timely post-inspection and post-incident/accident information from PHMSA.
• Requires a study the use of technology to improve third-party damage prevention.
• Requires the DOT Inspector General to study PHMSA resource constraints and make recommendations to Congress to address hiring challenges and training needs.┬á Also provides tools to enhance PHMSAΓÇÖs efforts to hire pipeline safety personnel.
• ΓÇóEstablishes a working group of PHMSA, state, public, and industry stakeholders to develop recommendations on how to create a voluntary information-sharing system to encourage collaborative efforts to improve safety and reduce risks.
• Directs PHMSA to study the feasibility and costs of a national integrated pipeline safety database in order to provide a clearer picture of federal and state safety oversight efforts.
• Requires PHMSA to set federal minimum safety standards for underground natural gas storage facilities, and allows states to establish additional standards for intrastate facilities.
• Allows State-certified inspectors to participate in interstate pipeline inspections.
• Authorizes emergency order authority for the pipeline sector, taking into account public health and safety, the pipeline network, and impacts on customers.
• Improves protection of coastal areas and waters, and the Great Lakes by explicitly designating them as unusually environmentally sensitive to pipeline failures, and mandates the inclusion of Response Plan procedures for these areas.
• Increases inspection requirements for certain underwater hazardous liquid pipelines.
• Requires a report on propane pipeline facilities servicing 100 or fewer customers.
• Updates regulations for certain liquefied natural gas (LNG) facilities to align with changing technology and markets and take into account national security considerations.
• Requires a report on the feasibility of odorizing all combustible gas in pipelines.
• Requires a report on natural gas leak reporting and state policies on natural gas leaks.

The requirements of the PIPES Act of 2016 demonstrate a tone of increased accountability to not only the pipeline industry but also to PHMSA in their implementation and enforcement of safety regulations. Of the forty-plus directives given to PHMSA in the 2011 Act, PHMSA has only completed about half. The 2016 PIPES Act seeks to increase PHMSA’s accountability to Congress for the completion of the 2011 Act requirements, as well as the new requirements of the 2016 Act.

PHMSA Increases Maximum Penalties for Pipeline Safety Violations

On June 30, 2016, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published an Interim Final Rule in Volume 81, No. 26 of the Federal Register. PHMSA is revising references in its regulations to the maximum civil penalties for violations of the Federal Pipeline Safety Laws, or any PHMSA regulation or order issued thereunder. Under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, (2015 Act) which further amended the Federal Civil Penalties Inflation Adjustment Act of 1990, federal agencies are required to adjust their civil monetary penalties effective August 1, 2016, and then annually thereafter, to account for changes in inflation.

Effective on August 1, 2016, the maximum penalty rises to $205,638 for each violation for each day the violation continues, except that the maximum administrative civil penalty may not exceed $2,056,380 for any related series of violations.

The 2015 Act only applies to penalties prospectively and does not retrospectively change any civil penalties previously assessed or enforced.

Starting in January 2017, PHMSA is required to publish in the Federal Register annual inflation adjustments for each penalty levied under 49 U.S.C. 60101, et seq., and do so no later than January 15 of each year.

Under the Administrative Procedure Act (APA), Office of Management and Budget (OMB) Guidance, and the requirements of the 2015 Act, PHMSA in not required to follow the otherwise required process for public notice and comments prior to issuing this interim final rule.